Emirates' IPIC Acquires 70% Stake in MAN Ferrostaal for $670.1 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--International Petroleum Investment Company (IPIC) (Abu Dhabi, United Arab Emirates), a state-run investment firm focused on foreign investments in the chemicals and oil sectors, is acquiring a 70% stake in MAN Ferrostaal AG (Essen, Germany), an industrial construction services provider and metals trader, for $670.1 million in an all-cash deal. IPIC is likely to purchase the remaining 30% stake in Ferrostaal by 2010. The two firms entered into a share purchase agreement earlier this month but closure of the deal, expected at the end of March 2009, will be subject to approval from international antitrust authorities.

IPIC and Ferrostaal will also set up a 60:40 joint venture entity, IPIC MAN Ferrostaal, in Abu Dhabi to pursue new business in the Middle East and North African (MENA) region. The joint venture plans to employ 500 personnel in the coming years.

The acquisition will provide IPIC with access to Ferrostaal's capabilities and worldwide network in the fields of project construction and management, petrochemicals and solar power. IPIC plans to award management contracts for large industrial projects to Ferrostaal, which will provide opportunities to foray into the MENA region in the areas of plant construction, as well as the biofuels and solar energy sectors. Ferrostaal's efforts will be directed at the production aspect of IPIC's operations in transport-related engineering. The deal also promises to increase the appeal of Ferrostaal for European firms hoping to become established in the Middle East.

Ferrostaal will now be involved in the management of the upcoming Chemaweyaat petrochemical complex in Abu Dhabi, which is being developed by IPIC. IPIC holds a 40% equity stake in the project, in collaboration with state-owned Abu Dhabi National Oil Company (Abu Dhabi), and Abu Dhabi Investment Council (Abu Dhabi), a sovereign wealth fund and investment company. The project will entail an investment of $20 billion and will occur in three phases. IPIC also intends to use Ferrostaal's services in projects in the Caspian Sea region where IPIC plans to invest $2 billion in oil exploration, chemicals production and the petrochemicals sector. Ferrostaal will also be involved in other IPIC projects such as development of a power plant in Libya, urea plants in Kazakhstan and Uzbekistan, and a refinery in Morocco.

Ferrostaal, a subsidiary of the engineering group MAN AG (FRA:MAN) (Munich, Germany), the third largest truck manufacturer in Europe, designs oil and petrochemical plants for clients in over 60 countries worldwide with a workforce of 4,200 employees. MAN agreed to sell a stake in Ferrostaal to IPIC in order to focus on its truck business. Ferrostaal is hoping to triple revenues from $2.25 billion in 2008 to $5.29 billion by 2014.

IPIC was established in 1984 as a passive investor focused on securing minority stakes in assets in the areas of oil processing, petrochemicals, development of pipelines, power projects and energy-intensive industries predominantly in Asia, Europe, Middle East and North Africa. The $15 billion firm is now aggressively pursuing integration of foreign assets into United Arab Emirate's economy and hopes to grow its investment portfolio to $20 billion over the next five years. In the coming years, renewable energy is likely to make up 10% of IPIC's investment portfolio, which will remain focused primarily on chemical, oil and gas.

IPIC is looking to increase its stake in OMV AG (OTC:OMVKY) (Vienna, Austria), an oil and gas company in which IPIC presently owns a 17.6% stake, and Compania Espanola de Petroleos SA (MCE:CEP) (Madrid, Spain), an energy firm in which IPIC owns a 9.5% stake. In 2008, IPIC acquired a 2% stake in Energias de Portugal SA (OTC:EDPFY), a major electricity operator in Europe. IPIC also picked up convertible bonds worth $1.82 billion issued by Aabar Investments PJSC (ABD:AABAR) (Abu Dhabi), an investment firm through which IPIC plans to diversify into non-energy sectors. Last year, IPIC set up energy investment funds worth $2 billion with Qatar and $1 billion with Kazakhstan.

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